Partial Autumn And Winter Fabric Price Falls Sharply And Basis Narrows (August 3-7, 2020)

First, domestic cotton yarn futures prices fell sharply, and the basis was narrowed

This week, the national cotton market monitoring system yarn index cncotton c32s average price of 18570 yuan / ton, down 17 yuan / ton compared with last week, yarn cotton price difference 6352 yuan / ton, reduced 90 yuan / ton compared with last week; cotton yarn futures main settlement average price 18613 yuan / ton, decreased 395 yuan / ton compared with last week, 43 yuan / ton higher than spot, and price difference narrowed 378 yuan / ton compared with last week.

Second, the price of international yarn is stable and falling

(I) 32 cotton yarns

This week, the average price of picking up goods at Indian ports was 18326 yuan / ton, which was 8 yuan / ton lower than that of last week, and the price difference between China and India [1] [1] narrowed by 9 yuan / ton to 244 yuan / ton compared with last week; the average price of goods picked up at Vietnam port was 18412 yuan / ton, down 20 yuan / ton compared with last week, and the price difference between China and Vietnam widened by 3 yuan / ton to 158 yuan / ton.

(II) 21 count cotton yarn

This week, the average price of picking up goods at Indian ports was 17350 yuan / ton, which was the same as last week, the price difference between China and India was reduced by 160 yuan / ton to 30 yuan / ton compared with last week; the average price of goods picked up at Pakistan port was 17240 yuan / ton, which was the same as last week, and the price difference between China and Pakistan was reduced by 160 yuan / ton to 140 yuan / ton compared with last week.

(3) 10 count rotor spinning

The average price difference between China and India was RMB - 517 / t last week and kept stable for two weeks.

3. The price of chemical fiber rises and falls

This week, the national cotton market monitoring system chemical fiber index cncotton PS (1.4d direct spinning polyester short) average price of 5390 yuan / ton, increased by 90 yuan / ton compared with last week, cotton polyester price difference narrowed 17 yuan / ton to 6828 yuan / ton, cncotton vs (mainstream viscose staple fiber) average price 8100 yuan / ton, down 40 yuan / ton compared with last week, cotton viscose price difference expanded 113 yuan / ton to 4118 yuan / ton.

4、 Future prospects

Some of the textile enterprises have withdrawn from the market, but some of them have taken up the market share. The impact of the epidemic led to the acceleration of industry reshuffle. At present, the order situation of some products is slightly improved, and the sales of some autumn and winter fabrics are picking up, but the price transmission has not been reflected, and the yarn price remains weak. The specific analysis is as follows:

1. Local autumn and winter fabric market is warm, and there is still a big gap year on year

It is reported that in recent days, local textile market shows warmth, and autumn and winter fabric order sales are picking up, which has released a positive signal to the market. The domestic market is picking up, and a small number of export orders have been issued.

According to the transaction statistics of China Light and textile city market, in July 2020, the trading volume of knitted fabric, cotton cloth and polyester cotton fabric increased by 87%, 22.1% and 24.3% respectively compared with the previous month (see Figure 1), which shows that the textile market is gradually recovering. With the advance of some autumn and winter orders at the end of July, it seems that there are bright spots in the traditional off-season of July and August. However, from the cumulative transaction situation in the first seven months of 2020, the year-on-year decrease is still between 20% and 40%, which shows that the impact of the epidemic on the whole industry is still large.

In addition, from the perspective of Keqiao Textile market prosperity index, although the overall prosperity index and total production prosperity index in recent months have rebounded significantly compared with March, they are still at the low level since 2017 (see Figure 2).

2. The Vietnam EU free trade agreement has come into force, and the textile and clothing made in China are facing competition

The free trade agreement between Vietnam and the European Union will come into effect on August 1, 2020, which means that the tariff of 71% of Vietnam's exports to the EU and 65% of the EU's exports to Vietnam will be exempted immediately. According to the agreement, about 99% of the tariff on bilateral trade in goods will be gradually reduced or even cancelled, which will greatly promote Vietnam's economic development. At present, the EU is Vietnam's second largest export market after the United States and an important source of Vietnam's trade surplus. Vietnam's main exports to the EU include telecommunications equipment, clothing, footwear and agricultural products. The EU mainly exports electrical equipment, aircraft, automobiles and medical products to Vietnam. For Vietnam's fast-growing textile and garment industry, 42.5% of the tax has been cancelled, and the remaining tax will be reduced in 3-7 years. After the entry into force of the EU agreement, the textile products in Vietnam, especially in China, will face competition.

3. The proportion of loss making textile enterprises increased, and the operating pressure of enterprises increased

According to the data of the National Bureau of statistics, in June 2020, the number of loss making enterprises in the textile industry accounted for 31.6% of the total number of textile enterprises, with a month on month increase of 0.3% and a year-on-year increase of 11.7%. The number of loss making enterprises in the textile and clothing industry accounted for 32.4% of the number of enterprises in the textile and clothing industry, with a month on month increase of 0.9% and a year-on-year increase of 10.5 percentage points (see Figure 3).

To sum up, with the haze of the textile industry, the supply and demand of textile industry is expected to recover. At present, local orders are warming in autumn and winter, but they are mainly concentrated on individual varieties. The sustained strength of recovery remains to be observed, and the driving effect on yarn price is not obvious. If the order continues to return, the price of yarn is expected to stop falling.

[1] the price difference in this paper is the difference between domestic yarn price and foreign yarn price.